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Tags: mlps | invest | 24 7 wall street | dividend

24/7 Wall St.: 4 Cash Flow Rich MLPs to Buy Now

24/7 Wall St.: 4 Cash Flow Rich MLPs to Buy Now

By    |   Friday, 11 December 2015 08:31 AM EST

Kinder Morgan’s 75 percent dividend cut sent shivers down the spines of many investors.

As the shock begins to fade, savvy investors not only must ask themselves “what now?” but also act to profit in the future.

Lee Jackson of 24/7 Wall St. offers advice and puts Kinder Morgan’s action into perspective.

“Not only does this end months of rampant speculation over what the iconic company would do, but it may very well mark a bottom in the long and painful energy sector decline,” he wrote.

He explained that “Jefferies analysts suggest that investors take advantage of huge price discounts and focus on high-quality, cash flow companies. Four companies meet that requirement at Jefferies and are the top picks” for investors now.

He also cautions to remember that these master limited partnership (MLP) distributions can contain return of capital. MLPs are investment vehicles structured to operate pipelines without paying federal income tax by passing earnings to investors.

AmeriGas Partners
AmeriGas Partners LP (NYSE: APU) is a retail and wholesale distributor of propane gas, and related equipment and supplies in the United States. “The stock has sold off pretty hard, and Jefferies still views this a very solid buying opportunity. The firm also points out that unlike other MLPs, this company is not constantly going to the equity markets to raise capital, and that is a big plus for unitholders with those markets currently all but shut,” he wrote. AmeriGas investors receive a very rich 10.15% distribution.

Enterprise Products Partners
Enterprise Products Partners L.P. (NYSE: EPD) is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers. “One reason why many analysts may have a liking for the stock might be its distribution coverage ratio. That ratio is well above one times, making it relatively less risky among MLPs. The company’s distributions have grown for several quarters and are expected to continue in 2016. Plus the Standard & Poor’s current rating is BBB+, which is investment grade, and the outlook is stable,” he wrote. Enterprise investors are paid very solid 6.36% distribution

Sunoco L.P. (NYSE: SUN) “operates more than 850 convenience stores and retail fuel sites and distributes motor fuel to convenience stores, independent dealers, commercial customers and distributors located in 30 states at approximately 6,800 sites, both directly as well as through its 31.58% interest in Sunoco LLC, in partnership with an affiliate of Energy Transfer Partners,” he wrote. Sunoco investors receive a very solid 8.27% distribution.

Williams Partners
Williams Partners L.P. (NYSE: WPZ) is an industry-leading, large-cap MLP with operations across the natural gas value chain from gathering, processing and interstate transportation of natural gas and natural gas liquids, he wrote. Williams shareholders are paid a large 14.07% distribution.
As money managers chase an oil recovery that hasn’t yet come, strategists across Wall Street are stoking optimism, Bloomberg reported.

JPMorgan Chase & Co. has boosted its rating on U.S. energy companies to a buy and Barclays Plc upgraded global oil producers. The ETF recently had its biggest one-day gain since its inception in August 2010, Bloomberg reported.

“Clearly people want to be in at the bottom, and they’re trying to pick exactly when,” said Randy Warren, who manages more than $100 million at Exton, Pennsylvania-based Warren Financial Service & Associates Inc. “That’s pretty dangerous and difficult to pull off. You have to be careful — the energy space is deadly right now.”

While MLPs may be struggling, investing in them still represents a superior way to pick a market bottom in oil when compared with instruments that don’t provide cash payments, Warren told Bloomberg.

“The dividend piece is a good way to play these things in the future,” he said. “You’re getting paid while you’re waiting.”

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Lee Jackson of 24/7 Wall St. offers advice and puts Kinder Morgan’s action into perspective.
mlps, invest, 24 7 wall street, dividend
Friday, 11 December 2015 08:31 AM
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